Heads of Law Commission and CVC frame new law to combat corruption

The heads of the Law Commission and the CVC are framing a new law to combat corruption.

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Sumit MITRA

December 28, 1998

ISSUE DATE: December 28, 1998

UPDATED: April 15, 2013 15:44 IST

Reddy's proposal gives the Government another handle to search the roots of corruption

In 1995, the Central Vigilance Commission (CVC) had advised Coal India Limited (CIL) to draw major penalty proceedings, for favouritism in award of contracts, against six members of a purchase committee. However, CIL spared from inquiry the highest ranking member of the committee, of general manager rank, without valid reason. The case was delayed by more than a year, during which the accused was promoted. An inquiry would have made him ineligible for promotion.

The CBI recommended prosecution against a senior official of the United Bank of India (UBI) for complicity in criminal conspiracy and fraud. The bank stalled prosecution for more than a year under the "single directive". However, a few days before the official's retirement was due, it informed the CVC about a stay from the Calcutta High Court against the CBI investigation. The suspect managed to retire honourably with full retirement benefits.

The South-Eastern Railway had received a complaint way back in 1988 that a group of its officers were running a racket of putting Group-D jobs on auction. The S-E Railway took seven and a half years to send a report to the Railway Board. The principal suspect had already retired.

Forfeiture formula

The law shall apply to public servants including holders of political office at the Centre.

"Illegally acquired property" includes property disproportionate to the suspect's known lawful source of income.

Furnishing false information on property in response to notice served can lead to criminal conviction with two years' imprisonment or fine or both.

The burden of proving that the forfeited property is not illegally acquired lies with the person affected.

The law's delay may be proverbial, but the hesitancy shown by the Union government in punishing the corrupt executive is baffling. In 136 government organisations monitored by the CVC, there are 5,310 cases pending departmental inquiry for periods up to 35 years.

Over 1,800 of the investigations that got started somehow have been hanging fire for anything between two and 12 years.

The recent enforcement of the CVC Ordinance has, of course, abridged the power of the bureaucracy to stall or scuttle inquiries into corruption by public servants.

But anti-corruption prosecution is still susceptible to blockading of evidence by the concerned public servants. As Central Vigilance Commissioner N. Vittal quips, the "risk" of prosecution for corruption is so low and the "profits" so high that it is difficult to demotivate a corrupt public servant.

However, the Law Commission of India, headed by Justice (retd) P. Jeevan Reddy, has recommended a law that can surely put the "risk" of corruption soaring. It is a law for forfeiture of illegally acquired properties of corrupt public servants. There is a provision for forfeiting property under the Prevention of Corruption Act (PCA), but it does not apply until a person is convicted under the Act.

The Prevention of Money Laundering Bill recently introduced in Parliament provides for confiscation of proceeds of crime only after a person is convicted of an offence mentioned in the Schedule. The Schedule to this bill does not include the offence of possession of disproportionate assets.

The law recommended by Reddy - the Corrupt Public Servants (Forfeiture of Property) Bill - makes room for forfeiture of public servants' unlawfully obtained assets along the line of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (SAFEMA), 1976.

SAFEMA was upheld in 1994 by a nine-judge bench of the Supreme Court headed, interestingly, by Reddy. In that judgement, he observed: "A dreaded disease calls for a bitter medicine and a bitter medicine is not necessarily a bad one."

The proposed law covers not only the properties of public servants but those in the names of their relatives and associates. Even the property that the corrupt public servant had sold to a citizen will be liable for forfeiture unless the buyer was a transferee "in good faith and for adequate consideration".

Besides, the scope of the law is much wider than that of the PCA under which it is obligatory to prove that the accused obtained assets through means that are not merely illegal but corrupt too. The proposed law, however, takes effect from the moment the "competent authority" has reasonable grounds to believe that the suspect is enjoying illegally acquired property. That is enough ground for a notice of forfeiture of property to be served on the person.

The action may originate from a disciplinary or departmental inquiry. It may be triggered by a discreet CVC or CBI inquiry based on some complaint. Mere disallowance by the Income-Tax Department of a deduction claimed by a public servant can lead to a probe into the legality of acquisition of the properties owned by the person.

Says Reddy: "By making the possession of illegal property an offence, we wanted to give the state an additional handle to search the roots of individual corruption. Proving corruption is time-taking but proving possession of unaccounted wealth is easy."

"Forfeiture is a 'financial risk' and its fear must be instilled in public servants".N. Vittal, Chairman, CVC

In the proposed law, the property that is liable for confiscation includes both movable and immovable. If the CVC has reasonable grounds to believe that a public servant holds disproportionate assets, it may serve a 30-day notice to the latter to list his sources of income for acquiring such assets.

If the CVC finds that the assets, or a part of these, are illegally acquired, the findings will be recorded and the assets will stand forfeited. Significantly, the burden of proving that any property such forfeited is not illegally acquired shall be on the affected person.

Anti-corruption inquiries reveal a pattern in the transfer of illegally acquired assets. When these are not held in the name of spouse, brother/sister or any lineal ascendant or descendant of the public servant, it is usually put in the name of a trust. Reddy says that there is also a general practice to show illegally acquired properties in the name of domestic helps, trusted and acquiescing accountants and even gullible poor relations who are otherwise dependent on the suspect.

N. Vital, Chairman, CVC

The proposed law brings all these under the definition of "relatives and associates". Reddy hopes that the extension of the application of the proposed law to the suspect public servant's relatives and associates will enhance the hidden costs of benami transactions. "For unhindered return of properties that were illegally obtained and transferred, the outsider benamdar will demand a huge payoff."

Under the recommended legislation, the central vigilance commissioner is the "competent authority" to order the forfeiture, and he is entitled to designate the vigilance commissioners as competent authorities. Vittal, who is rooting for its enactment, says forfeiture of graft property is a "financial risk" and its fear must be instilled into the hearts of public servants because "today there is no shame connected with corruption".

The Law Commission recommendation and the zeal currently shown by the CVC to curb corruption are offshoots of a 1997 judgement of the Supreme Court, headed by the then chief justice J.S. Verma, in which an elaborate ground plan was laid out to insulate anti-corruption enquiries from extraneous (executive or political) interference.

Vittal force

Ban on post-tender negotiation in Central government offices; bargaining allowed only with lowest tenderer.

Details of tender must be posted on office notice board.

Junior employees can initiate vigilance inquiries against superiors but frivolous complaints will be adversely viewed.

Banks and FIs under CVC's purview must offer electronic clearance services to customers by January 1, 2000.

The CVC Ordinance, based on a draft prepared by the Law Commission, owes its origin to the 1997 judgement. The push to the executive from the judiciary is gathering momentum. After the CVC became a statutory body, Vittal began issuing a series of circulars to various wings of the Union government on vigilance-related issues.

For example, he identified post-tender negotiations as the fountainhead of corruption in most government departments. Post-tender negotiations have been banned except in the case of negotiations with the lowest tenderer.

Even in such negotiations, the details have to be posted on notice boards. To check fraud in remittances and payment collections in banks, all banking companies and financial institutions have been told to offer electronic clearance services to their customers.

The RBI is therefore putting up a network of 438 VSATs linked to its hub so that a Wide Area Network (WAN) becomes operational before January 1, 2000. The CVC has taken up the matter with the Union Government so that adequate transponder capacity is given to the RBI.

Besides, the CVC has directed the RBI to make sure that at least 70 per cent of the nationalised banks' transactions are computerised within this century. The statutory power of the CVC has been offered as the reason why the issue cannot be negotiated with the bank employees' unions.

Vittal quotes Oscar Wilde to say that while the thief is an artiste the policeman is only a critic. But, with Reddy's law for forfeiture of graft property on the anvil and the tough circulars flowing out of the CVC, the critics seem to be getting a fuller measure of the "art", at last.

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